Levy of provisional anti-dumping duty

Case: VETCARE ORGANIC PVT. LTD. v/s CESTAT, CHENNAI

Citation: - 2011 (269) E.L.T. 444 (Mad.)

Issue:- When the final assessment of anti dumping duty is negative then duty imposed on provisional duty also does not survive.

Brief Facts:- Assessee are engaged in manufacture of Animal Feed Supplements and Veterinary Drugs. They were exporting their manufactured goods under Quantity Based Advance License Scheme (QBAL) under Duty Exemption Entitlement certificate Scheme, as per the EXIM policy.

In the circumstances, Assessee imported Hydroxy Quinoline viz, 8 HQ on six occasions under Bills and the period of import was covered between 30-12-1996 and 25-2-1997 from China for the manufacture of their finished goods. The raw material was imported between 15-11-1996 and 19-6-1997 and the export obligation under the QBAL was fulfilled. Admittedly, the import was covered under the EXIM Policy for 1992-97, particularly in terms of Paragraphs 47 and 48 of Chapter VII.

The Designated Authority initiated investigation proceedings on alleged dumping of 8-Hydroxy Quinoline imported from China based on a complaint filed by M/s. West Bengal Pharmaceuticals and Phytochemical Development Corporation Ltd., Calcutta. Based on the enquiry initiated on 4-3-1996, provisional demand was raised against Assessee calling upon them to pay anti-dumping duty in terms of Notification No. 80/96-Cus dated 16-10-1996 under six different orders, issued by the Ministry of Finance.

Assessee stated that it was the only one company which participated in the investigation.

Aggrieved by the levy, Assessee preferred appeals before the Commissioner (Appeals) who confirmed the demand in respect of six bills of entry. The Commissioner (Appeals), however, allowed duty exemption in respect of one bill of entry dated 30-4-1997, made after the issue of Notification No. 41/1997, revoking the anti dumping duty liability and directed the Designated Authority to consider the prayer for drawback.

Assessee preferred appeals before the Tribunal. While the Judicial Member agreed with Assessee on account of order passed withdrawing the earlier notifications, the Technical Member, however, differed. This resulted in the case being referred to a third Member for a decision. The third Member agreed with the Technical Member. Thus, the levy was confirmed.

Aggrieved by the same, Assessee has preferred appeal before the High Court, immediately after the preliminary proceedings, the Assessee filed reply on 4-10- 1996, reiterating its stand and pleaded for dropping the proceedings.

By Notification No. 27/97-Cus, dated 1-4-1997, the Designated Authority continued imposition of anti-dumping duty, it is stated that under Rule 13 of the Anti-Dumping Rules, 1995, the Central Government can levy provisional duty only based on preliminary findings of the Designated Authority. As per second proviso to the said Rule, the provisional duty could remain in force for a period of six months, which could be extended by nine months. The Designated Authority has to complete the investigation within a period of one year and give its finding or within the extended period of six months, as contemplated under Rule 14 of the Anti-Dumping Rules.

It is seen that the first respondent issued Notification No. 41/97-Cus., dated 30-4-1997 and modified the earlier notification. As per the modified Notification, imports made under the advanced licence were brought outside the purview of anti-dumping. Thus Notification No. 41/97 dated 30-4-1997 agreed with the contention of the assessee. It is seen from the facts presented before the High Court that on the decision taken to impose anti-dumping duty, the Assessee preferred Review Petitions. After re-considering the entire case, under Notification No. 5/2001-Cus, dated 22-1-2001, the Government rescinded the earlier notifications on the ground that there was no injury to the domestic market on the import of 8 Hydroxy Quinoline from China. However, while rescinding the earlier notifications, Notification No. 5/2001 dated 22-1-2001 protected the action already taken or omitted to be done before such rescission.

Aggrieved by the latter portion of the Notification, Petitioner has preferred writ petition. Petitioner has also challenged the applicability and levy of anti-dumping duty before this Court in W.P. No. 12403 of 1998.

Appellant’s Contention:- It was contended that once a finding had come that there was no liability to pay anti-dumping duty, there being no violation of the Anti-Dumping laws, the question of retaining the duty levied, did not arise. Petitioner contended that Notification No. 5/2001, containing a saving clause that things done or omitted to be done before such rescission, is contrary to the provisions of Anti-Dumping Rules, and in particular, to Rule 21(3). Petitioner contended that in terms of Rule 13 of the Anti-Dumping Rules, the provisional duty could remain for a period of six months, which may be extended for a further period as provided for under Rule 14 of the Anti-Dumping Rules. The Notification containing the saving clause is contrary to the provisions of the Act and violative of Article 265 of the Constitution of India.

Appellant submitted that as per EXIM Policy 1992-97, when imports are under actual user’s licence and the assessee had already performed its export obligation, the question of levying any duty under anti-dumping laws, does not arise, when the policy makers contemplating exemption from duty on performance of the obligations under the EXIM Policy, the benefit of such exemption policy has to be maintained. Throughout the period of policy of licence validity, unless and until the Licensing Authority or the Customs Authority alleged any violation either as to the policy conditions or to the provisions of the Customs Act, the question of denying the benefit of EXIM policy did not arise.

In short it was submitted that the provisions of the anti-dumping laws have no relevance to the compliance of the obligation under the actual user's licence. In the last clearance under the bill of entry dated 30-4-1997, the Revenue itself exempted the assessee from the provisions of anti-dumping laws, there being no violation. Going by the fact that the entire import was under one licence, one cannot divide the imports as one prior to the Notification of the year 2001 and post 2001. Since the import is a continuous process under the actual user's licence granted to the assessee, the Revenue is not justified in levying anti-dumping duty.

It was submitted that the contemplation of the Government was to encourage export to earn better foreign exchange for the State and that on performance of an export obligation, the assessee was entitled to refund of duty paid on export of goods.

It was submitted that given the object of EXIM policy, license granted to assessee and n the background of the Review notification, there was no dumping of goods in the country, the latter portion of Notification No. 5/2001 preserving those acts done or protecting the rights of the Government to do, cannot survive under any of the provisions of the Anti-Dumping Laws. Thus, the latter portion in Notification No. 5/2001 goes against the very scheme pf the anti-dumping laws. Hence, the same is beyond the purview of the Government to preserve any such authority. Thus, when the anti-dumping provisions are not available herein, on facts, the Notification preserving such authority is contrary to Article 14 of the Constitution.

Respondent’s Contention:- On notice, Revenue has filed a counter in the writ petition, supporting the Notification by contending that the petitioner had projected the case on a wrongful assumption that their case is covered by Section 18(4) of the Customs Tariff Act and Rule 21(3) of the Customs Tariff (Determination of Injury) Rules, when the withdrawal is conditional, the petitioner is not entitled to refund of the duty levied. The withdrawal of anti-dumping duty with effect from 22-1-2001 would, in no way, affect the levy and collection of anti-dumping duty and the earlier notifications. So too, any duty not levied or short-levied would be recoverable as per the Notifications, which were ruling the field till 2001. In the circumstances, the question of refund or dropping of the proceedings did not arise.

Revenue pointed out that Notification No. 5/2001 dated 22.01.2001 has only a prospective effect, in that, it seeks to preserve all acts done, apart from preserving the right of the Government, to take action in such of those acts in those cases, where there was an omission to levy duty.

Revenue fairly submitted the decision given in Rao Insulating Company Limited v/s Commissioner of Customs, Bangalore [2007 (213) ELT 101 (Tri-Bang)] wherein the Tribunal had accepted the assessee’s plea based on Notification No. 25/04-Cus dated 22.01.2004 that the words “except as respects things done or omitted to be done before such rescission" cannot authorise or preserve the imposition of anti-dumping duty. The Tribunal further pointed out that on a similar issue, the Chennai Customs have granted refund order, which has been accepted by the Department that the Notification could not protect acts, which are done in imposition of anti-dumping duty, etc.

Reasoning of Judgment:- The High Court agreed with submission of Appellant/Assessee in respect the vires of the portion of Notification No. 5/2001, dated 22-1-2001, in so far as it seeks to preserve the levy imposed as well as to reserve the authority to touch cases, which were omitted to be brought under levy as violative of the provisions of anti-dumping laws as well as Article 265 of the Constitution of India. Once on factual findings, the Government found that there was no dumping of materials from China in the local market and hence, the anti-dumping laws could not be invoked, the question of preserving any such authority to impose duty under the anti-dumping laws, does not arise.

It was noted that a reading of Rule 18 of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Deter-mination of Injury), Rules 1995 shows that once the Designated Authority arrived at a finding under Rule 17 of the Rules by a Notification in the Official Gazette, the Government could authorise imposition of anti-dumping duty as determined under Rule 17 of the Rules. Rule 18(4) of the Rules states that if the final finding of the Designated Authority is negative, i.e., there was no dumping of any materials and hence there was no basis for imposition for anti-dumping duty, the Central Government has to withdraw the provisional duty imposed within 45 days of the publication of the final finding by the Designated Authority, under Rule 17 of the Rules. A reading of the above Rules leaves no manner of doubt that on the finding thus given by the Designated Authority, the State cannot proceed further to preserve any order or reserve any jurisdiction on an authority, to protect any act done, either provisionally or otherwise or confer authority to assume jurisdiction to make a fresh levy. 14. In this regard, Rule 19 assumes significance. It states that any provisional duty imposed under Rule 13 of the Rules and anti-dumping duty imposed under Rule 18 of the Rules, shall be on a non-discriminatory basis and applicable to all imports of such articles from whatever sources found dumped.

Thus, on a reading of Rules 17, 18 and 19 of the Rules, it is clear that the assumption of authority to levy anti-dumping duty, rests on a positive finding on dumping, which is injurious to the local market, and that, once the finding is otherwise, the question of either maintaining a levy or imposing a fresh one, does not arise. In other words, the question of assuming jurisdiction in such cases would be contrary to not only the provisions of the Act, but would also be in violation of the Constitutional mandate.

Thus going by the abovesaid provisions, it is clear that the latter portion of the Notification, preserving the rights of the Government in respect of the duty imposed or to impose duty in cases where it was omitted to be done before the rescission of the earlier notification under Notification No. 5/2001 dated 22-1-2001, is contrary to the Scheme of the Anti- dumping laws and violative of Articles 14 and 265 of the Constitution of India.

The High Court referred to the relevant extract of Notification No. 5/2001-Cus., dated 22-1-2001. On perusal of facts, it was held that the Designated Authority in its review proceedings had given findings in favour of assessee by passing Notification No. 5/2001 dated 22-1-2001, that there was no anti-dumping. It is held that once those findings as regards anti-dumping remained unchallenged in any manner by the Revenue, the next consequence was to apply Rule 18(4) of the Rules.

It was noted that instead of doing so, Notification No. 5/2001-Cus., dated 22-1-2001 traveled beyond what is contemplated under the provisions of Anti-dumping laws, not only to preserve the action taken to levy duty, but also to preserve the authority to take action in cases where there was an omission to impose duty.

It was held that such reservation of authority goes against the very scheme of the Anti dumping laws. In the circumstances, the High Court agreed with Appellant that the levy, as such, cannot be made in the light of the findings given in Notification No. 5/2001 dated 22-1-2001.

In the light of the decision thus arrived at, the High Court held that it is not necessary to consider other issues raised, particularly with reference to the compliance of the actual user license conditions and the duty exemption scheme, vis-à-vis, the anti dumping laws.

Since the entire action is based on Notification No. 5/2001 dated 22-1-2001, High Court felt that it is suffice that the other issues need not be gone into herein.

It was noted that purpose of introducing EXIM policy is to accelerate the economic growth to derive maximum benefits from the expanding global market opportunities. In giving a stimulus to sustain the economic growth, the Government thought it fit to provide access to essential raw materials, intermediates, components, consumables and capital goods required for promoting production. The object of this policy, hence, could be achieved only through the coordinated efforts of all the Departments of the Government, in general. As enunciated in the Policy, given the objective as stated above, the various Wings of the Government must act with a shared vision and commitment to facilitate better export promotion. The latter portion of the Notification, which is under challenge before this Court, clearly demands the attention of the respondents to the policy of the Government, to give a full thrust to it and not to whittle it down on any assumed interest in the name of implementing the Anti-Dumping Laws.

Hence the import of raw materials for export under QBAL Scheme cannot be subjected to anti-dumping duty.

Accordingly, Writ Petition No. 21504 of 2001 allowed. It was declared that Notification No. 5/2001-Cus., dated 22-1-2001, issued by the first respondent, in so far as it purports to save things done or omitted to be done before such rescission, is ultra vires Sections 9A, 9AA, 9B and 10 of the Customs Tariff Act, 1975, Article 265 of the Constitution of India and Rules 13, 17, 18(4) and 21(3) of the Customs Tariff (Identification Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, in so far as the petitioner is concerned.

Impugned order of the Tribunal set aside. Hence C.M.A. No. 3727 of 2004 stands allowed. In the light of the order passed in W.P. No. 21504 of 2001 and C.M.A. No. 3727 of 2004, no separate order need be passed to consider the challenge made in WT. No. 12403 of 1998. Accordingly, W.P. No. 12403 of 1998 stands closed.

Decision:- Petition disposed off

Comment:- This is very important decision where the High Court has clearly held that when the final finding of designated authority is against the imposition of anti dumping duty then the duty levied on provisional basis will also be abolished. This means that when it is held that there is no injury to trade from import and there is no need to impose Anti dumping duty then there was no need to impose such duty during any period. Hence the government has to return the duty paid at the time of imposition of provisional anti dumping duty.

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PJ/Case Laws/2011-12/1335

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